Commissioner of State Taxation v Extos Pty Ltd
[2000] WASCA 293
•13 OCTOBER 2000
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: COMMISSIONER OF STATE TAXATION -v- EXTOS PTY LTD & ORS [2000] WASCA 293
CORAM: IPP J
WALLWORK J
WHEELER J
HEARD: 1 SEPTEMBER 2000
DELIVERED : 13 OCTOBER 2000
FILE NO/S: FUL 207 of 1999
BETWEEN: COMMISSIONER OF STATE TAXATION
Appellant
AND
EXTOS PTY LTD
ANTHONY LEON VILLANOVA
JUDITH LOUISE VILLANOVA
Respondents
Catchwords:
Stamp duties - Assessment - Appeal - Refund in part
Stamp duties - What transactions or instruments are liable - Agreement to exchange Tavern businesses and land - Goodwill - Dispute after settlement - Tomlin orders - Relevance of underlying facts in dispute - Effect of events subsequent to assessment - Turns on own facts
Legislation:
Federal Court Rules, O 35 r 3
Liquor Licensing Act 1988 (WA), s 37(5)(b), s 84, s 88
Stamp Act 1921 (WA), s 15A
Result:
Appeal allowed
Representation:
Counsel:
Appellant: Mr G T W Tannin & Mr J A Thomson
Respondents : Mr A J Goldfinch
Solicitors:
Appellant: State Crown Solicitor
Respondents : Goldfinch & Co
Case(s) referred to in judgment(s):
Casella v Commissioner of State Taxation (WA) (1996) 32 ATR 426
Commissioner of Stamp Duties (Queensland) v Hopkins (1945) 71 CLR 351
Islam v Askar [1994] TLR 516
Jericho Nominees Pty Ltd v Dileum Pty Ltd (1992) 6 WAR 380
Case(s) also cited:
Anthoness v Anderson [1887] 14 VLR 127
City of Brisbane v Commissioner of Stamps (1923) QSR 58
Commissioner of Taxation v Murry (1998) 72 ALJR 1065
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1976) 138 CLR 423
Hamwood v Commissioner of Stamps (1900) 10 QLJ 57
Jack v Small (1905) 2 CLR 684
Metro Taxi Management Pty Ltd v Commissioner of State Taxation (1996) 96 ATC 672
Spring Grove Pty Ltd v Commissioner of State Revenue (2000) 44 ATR 259
IPP J: I have read the reasons to be published by Wheeler J. I am in agreement with those reasons and have nothing further to add.
WALLWORK J: I agree with the reasons for judgment of Wheeler J and to the order proposed by her Honour.
WHEELER J: This is an appeal from a decision of McKechnie J of 30 November 1999 allowing, in part, an appeal by the respondents against an assessment of stamp duty and ordering a refund of part of the sum of duty paid by them. The factual background is of some complexity, but can be summarised briefly as follows.
Prior to 6 April 1991, the Wanneroo Villa Tavern Business ("Wanneroo Tavern Business") was owned by the respondents and operated on land ("the Wanneroo land") owned by Antonio and Lorna Villanova ("the Senior Villanovas"). The Ashfield Tavern Business was owned by Redmond Pty Ltd ("Redmond") and conducted upon land owned by Purdat Pty Ltd ("Purdat"). The land upon which the Ashfield Tavern Business was conducted was initially leased to Redmond but the lease was later assigned to another.
On 6 April 1991, the parties essentially agreed to exchange businesses and associated land by the following steps:
•the respondents sold the Wanneroo Tavern Business to Purdat
•the Senior Villanovas were to lease the Wanneroo land to Purdat, which they subsequently did
•the respondents purchased the Ashfield Tavern Business
•the respondents purchased the Ashfield land, subject to the existing lease.
These arrangements were settled on about 19 June 1991. As part of these arrangements, the Wanneroo Tavern liquor licence and business name were transferred by Extos Pty Ltd ("Extos") to Purdat. I should note at this point that it was a term of the lease that Purdat acknowledged that the business name was owned by the Senior Villanovas, who were the lessors of the Wanneroo land. The relationship between Extos and the Senior Villanovas and the role, if any, of Extos in the Wanneroo Tavern Business is not clear from the agreed facts. The agreement to purchase the Wanneroo Tavern Business was an agreement made between Purdat on the one hand, and the Senior Villanovas and Extos on the other. It should also be noted that it was a term of the lease that upon ceasing to be
the lessee, Purdat would transfer the business name to the lessors or their nominees. In the lease Purdat further acknowledged that "beneficial ownership" of the liquor licence was with the Senior Villanovas and agreed to execute as transferor and deliver to the Senior Villanovas three blank forms of transfer of licence to be held in escrow until the expiry or earlier determination of the lease. It is not clear from the agreed facts whether such execution and delivery took place.
Redmond was deregistered as a company in December 1992. In 1993, a dispute arose between the parties which involved, among others, the following steps.
•On 21 June 1993, Purdat commenced Federal Court proceedings against the respondents and the Senior Villanovas in relation to the 1991 agreements.
•On 7 July 1993, the Senior Villanovas notified Purdat of a default in relation to the lease of the Wanneroo land as to the payment of rent and provision of turnover figures.
•On 20 July 1993, Purdat obtained an injunction in its Federal Court proceedings to prevent the Senior Villanovas re-entering the Wanneroo land until 28 July 1993.
•By letter dated 27 July 1993, Purdat gave notice rescinding the agreements referred to in relation to the Wanneroo land and expressing an intention to vacate the Wanneroo land from 28 August.
•On 28 July, the Federal Court ordered Purdat to vacate the Wanneroo land by 8 August. At about this date, Purdat prepared a notice of motion seeking to further restrain re-entry by the Senior Villanovas.
•By letter dated 3 August 1993, the respondents and the Senior Villanovas asserted that the claim for rescission could not be made due to (inter alia) the deregistration of Redmond, but treated the statements of the letter dated 27 July as repudiation of the lease of the Wanneroo land and purported to accept the repudiation.
•On 5 August 1993, Purdat, the respondents and the Senior Villanovas met and settled their claims in principle by heads of agreement which were to be subject to the approval of the parties' respective lenders.
•Purdat vacated the Wanneroo land on 11 August, pursuant to the heads of agreement.
•On 19 August 1993, a number of things happened. The agreement contained in the heads of agreement as finally settled by the parties was incorporated in a schedule to orders staying the Federal Court proceedings. The settlement orders were "Tomlin" orders; that is, were not part of the order itself but recorded the compromise reached between the parties. However the schedule of a Tomlin order is still part of the court's record: Islam v Askar [1994] TLR 516. Items 1 and 2 of that schedule read as follows:
"1The applicants [relevantly, Purdat] do take such steps as are necessary to reconvey, free of encumbrances, the Wanneroo Business and all plant and equipment listed in annexure 'B' to the Wanneroo lease to the first respondents [the respondents to this appeal] in like condition save for fair wear and tear and all licences attaching thereto.
2The Wanneroo lease be and is hereby terminated and the applicants and the second respondents [the Senior Villanovas] hereby release each other from all obligations arising thereunder save and accept as provided for in this agreement."
The agreement also provided that there be a stocktake of the stock-in-trade of the Wanneroo Business, the value of which was to be paid by the respondents to this appeal to Purdat with the stock-in-trade being transferred to the respondents, after allowing for certain deductions. The parties by the agreement, and subject to each party satisfying their respective obligations under it, released and discharged each other from any further actions or claims in relation to, inter alia, the Wanneroo sale agreement and the Wanneroo lease. The parties agreed to sign and execute such further documents as were reasonably necessary or desirable to give effect to the agreement.
Also on 19 August - whether before or after the time at which the order was made is not clear - Purdat executed a notice of application for approval to transfer the liquor licence in respect of the Wanneroo Tavern Business and a statement of change in particulars of business name in relation to the business name of that business.
•On 21 August 1993, the Senior Villanovas leased the Wanneroo land to the respondents.
•On 22 August, Purdat entered into a deed disclaiming any interest in the Wanneroo Tavern Business and the associated goodwill business and liquor licence.
On 15 February 1994, the respondents were assessed to pay $33,392.50 stamp duty on the basis that the settlement orders effected a transfer of assets of $890,990 to them. Of this amount, $710,000 was attributed to the transfer of goodwill in relation to the Wanneroo Tavern Business. The respondents objected to the assessment to the extent that it was based on the transfer of goodwill. No objection was made to the valuer-general's assessment of the value of the goodwill.
On 17 August 1995, the Federal Court amended the schedule to the settlement orders at the request of the respondents, removing reference to the transfer of the Wanneroo Tavern Business and to the liquor licence. The orders as amended then read:
"1The applicants do take all steps as are necessary to transfer free of encumbrances all the plant and equipment listed in annexure 'B' to the Wanneroo lease to the first respondents in like conditions save the fair wear and tear.
2The Wanneroo lease has been terminated and the applicants and the second respondents hereby release each other from all obligations arising thereunder save and except as provided for in this agreement."
The Decision of McKechnie J
His Honour's decision appears to have been based on the Tomlin order as amended on 17 August 1995. His Honour took the view that that amended order, which he held to reflect the true agreement between the parties, should be construed as a transfer of property only in respect of the fixtures and fittings set out in annexure "B" to the Wanneroo lease and in respect of the Ashfield land. His Honour also noted that the transaction was an unusual one. While accepting that generally on the sale of a business or even the buy-back of a business, one would expect goodwill to be transferred, his Honour took the view that in this case each party "simply walked away" from the businesses which they had been conducting and re-entered the businesses they had previously owned. His Honour thought that, "The Wanneroo lease having been terminated, there was really no business which … Purdat could convey". His Honour did not express a view as to the date from which the Wanneroo lease had been terminated.
The Issues in the Appeal
The point raised by the appellant on this appeal was a short one. However, it was met by submissions on behalf of the respondents raising matters which should properly have been the subject of a notice of contention. On the appellant's indication that it was in a position to deal with arguments of this kind in reply, the court heard argument and subsequently received from the respondents a notice of contention raising the matters canvassed by it.
The respondents assert that, on the authority of Commissioner of Stamp Duties (Queensland) v Hopkins (1945) 71 CLR 351, if a person purports to make a conveyance of something in respect of which he has no interest whatsoever, the instrument by which that conveyance is purportedly made would not be dutiable as a conveyance. They assert that the true position at the date of the Federal Court order in August 1993 was that the lease had "come to an end"; by vacating the premises Purdat had ceased to have an interest in the liquor licence, and there was therefore nothing save for the fixtures and fittings to be reconveyed to the respondents. The amendments to that order in 1995, it is said, merely regularise the position (to put it neutrally) by bringing the schedule to the court order in line with the reality of the transactions.
The appellant's contention is that the 1993 agreement was an agreement which involved conveyance of the goodwill, that duty was correctly assessed on it in 1994, and that the order of 1995 cannot have the effect of invalidating an assessment which was valid when it was made. It is probably convenient to turn to the last of these assertions first, since it appears to be the proposition which directly attacks the reasoning of McKechnie J.
The Effect of the 1995 Order
In my view, the appellant's submission in respect of this issue is correct. The position is analogous to that which arose in Casella v Commissioner of State Taxation (WA) (1996) 32 ATR 426. In that case, a contract for the sale of land was entered into and apparently presented for the assessment of duty. However, prior to the assessment, the parties, by mutual agreement, rescinded the contract, conditional upon a deposit being repaid and repayment of certain other expenses. It was argued that since the assessment was made subsequent to the rescission of the contract, the contract was no longer an "instrument" for the purposes of the Act and was incapable of attracting duty. Franklyn J, with whom Ipp and Parker JJ agreed, did not accept that that assessment was invalid for the reason advanced. His Honour held (at 431, omitting citations):
"The scheme of the Act is that duty is chargeable on instruments and not on the transactions they represent. The instrument came into being and so became liable for duty. Relief from that liability or the right to a refund in whole or in part after payment of that duty or the creation of an obligation to pay a lesser sum by way of duty than the ad valorem duty provided for by the second schedule can only result by way of the application of a provision of the Act. The only relevant provision is s 15A."
In this case, leaving aside the question of whether there was any interest to convey, the assessment was valid at the date at which it was made. Liability under that assessment could be affected by the provisions of s 15A of the Stamp Act where the instrument was "rescinded, annulled, discharged or cancelled …". However, it has never been asserted by the respondents that s 15A has application in this case.
Further, it is my view that the appellant is correct in the assertion that, at least as against third parties such as the appellant, the orders of 1995 were not effective to rectify the original order ab initio. The court did not order that the 1995 order should take effect from an earlier date: O 35 r 3, Federal Court Rules. For these reasons, I would respectfully disagree with the view taken by McKechnie J.
Was There Anything to Convey?
The respondents' submissions, although expressed somewhat differently, boil down in the end to the following propositions. Under the lease, the business name was the property of the Senior Villanovas and at the cessation of the lease was to be transferred to them or their nominee; under the lease, Purdat acknowledged that the beneficial ownership of the liquor licence was that of the Senior Villanovas and agreed to the execution of the blank forms of transfer of licence, to which I have already referred; the goodwill of the business attached primarily to the licence, which was an asset of the Senior Villanovas (Jericho Nominees Pty Ltd v Dileum Pty Ltd (1992) 6 WAR 380); the lease was either validly rescinded by Purdat or was repudiated by Purdat and that repudiation was accepted. Further, the respondents point out that on 11 August 1993, the Director of Liquor Licensing granted a protection order in respect of the Wanneroo Tavern Business to Extos; it is not clear to me why this was considered to be of particular significance, since by reason of s 88 of the Liquor Licensing Act, a protection order does not operate as a transfer, or prejudice the consideration of an application to transfer a licence, although, as a person who could be granted a protection order, the Senior Villanovas were persons in respect of whom the Director could grant an application for approval of transfer of the licence (s 84 of the Liquor Licensing Act). The respondents also assert that in any event since Purdat vacated the Wanneroo land on 11 August 1993, its interest in the licence therefore terminated pursuant to s 37(5)(b) of the Liquor Licensing Act. And as a last resort, the respondents assert that even if the lease did survive what they allege it to have been either the recission or acceptance of a repudiation, by the time parties entered into the heads of agreement on 5 August, "neither party … regarded the lease as still being on foot", and the parties conducted themselves so as abandon or abrogate the lease. On any analysis, the respondents assert that, the lease having been determined prior to the 1993 orders, there was nothing further to be conveyed to them.
For the sake of completeness, I should note that in an affidavit filed on behalf of the respondents in the Federal Court on the application to amend the 1993 orders, it was deposed by the solicitors for the respondents that an additional reason that the lease was at an end was that Purdat was in default under the lease and that the Senior Villanovas were therefore entitled to re‑enter pursuant to the lease.
Before expressing a view in relation to the respondents' submissions, I should note that, as the outline of the facts which I have given indicates, a number of events appear to have taken place on the same day, ie, 19 August 1993. It would appear to me that, if it be relevant to determine which of these events were first in time, and in the absence of any evidence to the contrary, the view most favourable to the respondents should be taken, it being for the objector/appellant, applying the general principles applicable to appeals, to satisfy the court that the assessment and the determination of the Commissioner on the objection were in error.
It is also desirable to note that Hopkins was a case concerned with the admissibility of extrinsic evidence in order to determine the nature of a transaction to which an instrument relates, and that the passage most relevant to the argument of the respondent appears as but one part of the reasoning in the dissenting judgment of Latham CJ. This is not to dispute the proposition advanced by the respondents that, if there is nothing to convey, there can be no conveyance; however, that decision is far from the facts of the present case.
The principal difficulty with the respondents' submission appears to me to be the fact that the whole point of the agreement entered into between the parties and scheduled to their 1993 orders was to avoid factual and legal disputes so as to enable the physical return of the premises, fixtures and fittings to the respondents and the formal transfer to them of the liquor licence and business name. It was asserted by them in the Federal Court that the Senior Villanovas had a right of re‑entry, which appears to have been disputed as a matter of fact by Purdat. Purdat, on the other hand, asserted a right to rescind, which was disputed by the respondents. The respondents took the view that correspondence from Purdat amounted to a repudiation of the lease.
The respondents certainly had obtained from the Federal Court an order that Purdat deliver up the premises, but it was of course open to Purdat to seek variation of that order and, for whatever reason, the respondents themselves consented to a variation of at least a few days in the time leading up to negotiation of the heads of agreement. Meanwhile, the position was that Purdat remained physically in possession of the premises until after the heads of agreement had been agreed. It remained in possession of the business name; it only executed the relevant document to enable the transfer of that name to the respondents after the orders of 19 August 1993. It retained the liquor licence until it vacated the premises after entry into of the heads of agreement, when its interest in the licence terminated (s 37(5)(b) of the Liquor Licensing Act); even then, however, s 84(3) of the Act would apparently have permitted Purdat to appear before the Director of Liquor Licensing and be heard in opposition to a transfer.
To determine that, on any view, the lease had been determined and all rights of Purdat in the premises, the business name, and the liquor licence had come to an end prior to the 1993 orders, seems to me to fly in the face of what the parties eventually agreed. If one or the other of them had wrongfully breached or repudiated the contract, the injured party would have had a right to damages. Instead of pursuing such a right, however, each negotiated an agreement "as if " there had been no breach, and "as if" Purdat were lawfully in possession of the business. The negotiations of that agreement began at a time when Purdat was in physical possession of the premises, and of all that comprised the business, and it appears that it was only on the basis of the agreement which came to be embodied in the 1993 orders that Purdat agreed to give up whatever interest it then had. I do not understand the principle referred to in Hopkins to require the court to go behind the agreement of the parties and to determine what were the "true facts" of the dispute which it was the purpose of the agreement to resolve. To do so would appear to me to be wrong in principle, as inconsistent with the nature of an agreement of this kind. It would also have significant practical difficulties, since it would require the court to determine these issues in the absence of one of the parties to the dispute, in the absence of any evidence putting the relevant correspondence in context, and a considerable time after the relevant events occurred.
In any event, whatever orders a court might have made had the litigation been pursued, and whatever the rights which the respondents may have been able to enforce had they continued with the Federal Court action, as a matter of fact at the date of the 1993 orders Purdat retained the business name. It was to be considered as a "licensee" at least to the limited extent of s 84(3) of the Liquor Licensing Act so that its execution of an application to transfer would facilitate formal transfer of the licence to the respondents; it should be noted in this connection that the application for transfer was to the respondents rather than to the Senior Villanovas to whom Purdat acknowledged, under the lease, the licence "belonged" and who had been the applicants for the protection order. This was not strictly then a case of re-entry by an owner who wished to take up the licence but rather, a transfer to a third party at the request of the owner.
It cannot therefore be said, as the respondents assert, that nothing remained to be done upon Purdat vacating the Wanneroo land and that the goodwill associated with the licence and business name "automatically" reverted either to the Senior Villanovas or to the respondents. In my view, it was open to the Commissioner of State Taxation to regard this transaction (that is the agreement by which the action was settled) as an agreement to convey those items, which carried with them the goodwill of the business, ie, the business name, the licence, and the plant and equipment.
I would add that, even if the schedule to the 1993 orders is not to be regarded as an agreement to transfer property, it seems from the agreed facts that it must be a record and/or acknowledgment of an agreement or successive agreements entered into by the parties between 5 August 1993 (the date on which the heads of agreement were recorded) and 19 August, on which the orders were finally made by consent. It seems clear enough from the correspondence that the action of Purdat in vacating the Wanneroo land so that it might then be leased to the respondents, took place pursuant to an agreement between the parties, by which they agreed to seek a variation of the Federal Court order which had originally required Purdat to vacate the Wanneroo land by 8 August. The suggestion by the respondents that Purdat's interest in the licence "came to an end", not because of the agreement recorded in the court orders, but because Purdat vacated the land, seems to me to ignore the fact that the vacation of the land itself appears to stem from an agreement, which included the matters set out in the agreements annexed to the 1993 orders.
In that context, it is difficult to read the agreement annexed to the 1993 orders as anything other than as an agreement or an acknowledgment of an agreement to do precisely what the first paragraph suggests, that is, to "reconvey … the Wanneroo Business" to the respondents. It appears to me to be entirely beside the point to suggest, as the respondents now do, that had they pursued their legal rights, a court may well have made orders which would have rendered such an agreement unnecessary.
Having reached the views that I have expressed at pages 7 and 8 in relation to the decision of McKechnie J, and having found that the instrument was effective to convey the goodwill contrary to the notice of contention of the respondent, I would allow the appeal.
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